This study addresses the impact of foreign direct investment in the Mexican industry focusing on the establishment of mechanisms for the transmission of technological spillovers. Three main questions are posed: (a) Can we identify channels for the transmission of spillovers from FDI to the domestic economy? (b) Are there industry characteristics that influence the possibilities of capturing spillover benefits? and (c) Can host-country governments influence the benefits received by domestic firms from FDI through the use of public policies?; The methodological approach followed involves two stages. In the first stage, four effects are identified for the transmission of spillovers: linkage, collaboration, demonstration, and training effects. Next, econometric specifications are derived based on the profit-maximizing behavior of firms. Survey data is then used to evaluate these models. The results provide an initial assessment of the impact of the foreign presence in an industry, as well as propositions to be tested in the second stage of the study. In the second stage, three industries are selected for closer analysis through case studies: chemical fibers, pharmaceutical, and electronics.; It is found that foreign presence is associated with a higher rate of introduction of innovations in the production process as well as labor training (demonstration and training effects). However, it seems to have a negative effect on the extent of inter-firm collaboration agreements (collaboration effects). Regarding the impact on subcontracting (linkage effects), the results are inconclusive. Industry concentration is negatively associated with the development of mechanisms for the transmission of spillovers.; We identify three groups of variables that affect the extent of spillover effects: nature of the industry, government policy, and strength of the domestic sector. Current economic and institutional structures have placed constraints on the policy choices available to governments seeking to increase the benefits received from FDI. Thus, a policy approach based on proscriptions (performance requirements) is no longer feasible. Instead, we propose to focus on a set of policy areas intended to strengthen domestic firms and their efforts to learn and interact with their foreign counterparts: improved access to financing, use of fiscal incentives for technological activities, and elimination of information asymmetries through the strengthening and improved access to the technological infrastructure.
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